Vancouver Founder Fund last year closed its first fund, a $14-million capital pool that it has invested in 10 B.C. startups.birdigol/Getty Images/iStockphoto
A fledgling Vancouver venture capital firm that has had an unusual success rate early in the life of its first fund is aiming to raise almost three times as much with its second capital pool – and making quick work of it.
Vancouver Founder Fund (VFF), founded by Recon Instruments co-founders Dan Eisenhardt and Fraser Hall and associate Jay Rhind, last year closed its first fund, a $14-million capital pool that it has invested in 10 B.C. startups. Two of the firms have shot out of the gate: Online furniture retailer Article – co-founded six years ago by Mr. Hall – is on track to triple sales this year, after expanding six-fold last year and three-fold in 2015. Article, which has generated just less than $100-million in sales in the past 12 months, has "totally blown our socks off in terms of performance," Mr. Rhind said.
Meanwhile, Thinkific, an online platform that enables people to build, deliver and market courses digitally, was doing $15,000 a month in revenue when VFF invested in March, 2016. It's now generating more than $5-million on an annualized basis. Between the two startups, VFF has committed more than one-third of the first fund's capital.
Other companies backed by VFF include one of Canada's more prominent fintechs, Grow, and Klue, a competitive intelligence software firm founded by ex-Vision Critical president Jason Smith.
Now, for its second fund, VFF is aiming to raise $40-million with a hard cap of $50-million. It's off to a heady start: VFF is set to surpass its goal of raising $20-million for its first close next week, and BDC Capital has expressed its intent to invest for the second close. "Almost all of our limited partners" - 30 investors in Fund I - "are doubling down," Mr. Hall said.
Chris Bissonnette, an active local angel investor who provided $500,000 for VFF's first fund, has committed $1.2-million for the second. "I think the portfolio they built with that first fund is very strong, and the companies in there are doing very well," said Mr. Bissonnette, a member of a VFF advisory committee representing the fund's backers.
Mr. Hall said that after the experience building Recon – bought by Intel in 2014 for a reported $175-million – he and his VFF co-founders "set out to be the funders we wished we had" by being friendly to the founders they backed and working closely with them. "Our dream is that when they ring the bell at Nasdaq, they ask us to [stand] alongside them, because we've been important to them the whole way through," he said.
Mr. Smith said that when he set out to raise $3-million (U.S.) for Klue, he was impressed by how the VFF team helped him to better understand the intricacies of negotiating term sheets with investors, even to the point of favouring his interests over theirs. "That was the clincher. They're negotiating a better deal for me," he said. VFF was part of the OMERS Ventures-led funding that closed early this year. Since then, Mr. smith said the VFF team has "been non-stop available and never pushy about operational challenges. They're true operators."
VFF looks for companies with revenue-generating products in market and about 10 to 20 employees and plans to invest about $1.5-million (Canadian) on initial investments with the second fund, up from between $750,000 and $1-million in the first fund.
The VFF team acknowledges they still have a lot to prove, particularly given their biggest investment is in a company Mr. Hall co-founded. "In some people's minds there's an asterisk beside our performance," Mr. Rhind said.
But Mr. Bissonnette says the fund's founder-friendly focus is helping VFF stand out in the Vancouver startup scene. "People appreciate what VFF has done, and the reputation gets out," he said. "They see every great deal in Vancouver because people want to work with them."
Sean Silcoff